Period     2Q13/1H13

Actual vs. Expectations    Maxis’ 1H13 core NP of RM1081m came in within expectations and accounted for 48.3% and 47.0% of our and the consensus full-year forecasts.    

Dividends    As expected, a single-tier tax-exempt dividend of 8.0 sen was declared with the ex-date set at 4 Sept. For the full financial year, we expect a total dividend of 40.0 sen, similar to FY12.   

Key Result Highlights   YoY, revenue for 1H13 went up by 4% to RM4.6b, driven by higher contributions from all the business segments; namely mobile services, enterprise fixed services, international gateway and home business. EBITDA improved by 2% to RM2.3b while the margin fell to 49.5% (vs. 50.4% a year ago) as a result of the higher direct expenses. However, the core NP was lower by 2% to RM1.1b due mainly to the higher effective tax rate (28.2% vs. 25.6%). 

QoQ, 2Q13 turnover slid 2% to RM2.3b while the core NP grew 7% as a result of higher EBITDA margin (50.8% vs. 48.2%) that was mainly thanks to lower (i) staff-related expenses; and (ii) sales & marketing costs.

Maxis recorded a total of 6k net adds in subscribers in 2Q13, bringing its total subscriber base to 13.0m, comprising 22k in postpaid but partially offset by 16k net loss from the prepaid segment. Prepaid ARPU contracted to RM34 from RM35 in the last quarter while postpaid ARPU increased RM1 to RM104. Meanwhile, there was a total of 36.1k (vs. 30.7k in 1Q13) FTTH subscribers as of 2Q13.  

Smartphone penetration rate soared to 52% from 39% in 1Q13. Its non-voice revenue, on the other hand, at RM1.0b accounted for about 47.6% (1Q13: 47.8%) of the group’s mobile revenue in 2Q13.

Outlook    There is no change in management’s earnings guidance where the group is targeting to achieve (i) a mid-single digit growth in revenue; and (ii) an EBITDA margin of 48%.    

Change to Forecasts   Raised core NP to RM2.1b (+2.4%) and RM2.2b (+0.2%) in FY13 and FY14 respectively after lowering staff-related costs and fine-tuning. 

Rating  Maintain MARKET PERFORM.

Valuation     We have raised our Maxis target price to RM7.32 (from RM6.94 previously) based on higher targeted FY14 EV/forward EBITDA of 13.3x (+1.5x SD) from 12.6x (+1.0x SD) previously, after considering the positive result showed from the on-going internal restructuring exercise (which targeted to be completed by end-August) as well as the newlyappointed CEO Morten Lundal, who could potentially bring a new milestone to Maxis in the future. 

Risks    Higher than expected margin pressure.

Source: Kenanga